Trends 2024

This is a piece that the team at Davidson Investment Advisors puts together annually and is meant to provide some insight into exciting, disruptive, or otherwise new developments we anticipate being impactful to businesses, consumers and society.

Energy Transition

In response to climate risk and mounting social pressure for sustainability, energy production is undergoing a dramatic transition to replace fossil fuels with renewable energy sources such as wind, solar, hydro, and nuclear. Net Zero initiatives are calling on governments, companies, and other organizations to commit to becoming carbon neutral by the year 2050. Wind and solar sources are leading electrification efforts by growing capacity and improving efficiency, fast becoming cheaper than fossil fuel alternatives. The term “electrification” refers to technologies adopting electricity as an energy source as opposed to fossil fuels – for example, electric vehicles. In previous trends, Solid-State Batteries(Trends 2021) and Picogrids (Trends 2018) we’ve highlighted how advancements in technology are shaping the future of energy. Perhaps the pinnacular energy source for the future is nuclear fusion, providing virtually limitless clean power. Unlike fission, fusion is two atoms slamming together to make one heavier atom, resulting in large amounts of energy. Recent breakthroughs in nuclear fusion mark a significant step in being able to replicate the power of stars. In theory, nuclear fusion produces significantly more power than fission without producing radioactive waste, a major drawback to current nuclear energy production. Last December, the National Ignition Facility (NIF) achieved a decades-long goal of “ignition”, the process where a fusion reaction expels more energy than was originally input, resulting in a net energy gain. Since then, the process has been replicated several times with significant improvements to efficiency, able to produce 3.88 megajoules of energy from 2 megajoules of energy input, about as much energy as 1.5 pounds of TNT. However, utilizing nuclear fusion for grid scale energy production is still likely years, if not decades, away.

Multimodal AI

In November of 2022, ChatGPT (Trends 2023) captured the imagination of the public and offered a glimpse of what was possible with generative artificial intelligence (GenAI). Since then, it has been a race to invest and gain advantage. While the viral “blue duck” video introducing Gemini by Google DeepMind risked overselling the technology, multimodal AI will be an important evolution for artificial intelligence. Multimodal AI is artificial intelligence that combines multiple types (or modes) of data input that make it possible to generate more insightful or nuanced conclusions about realworld questions. Until now, most AI systems have been unimodal, designed and trained to work with one type of data exclusively and tuned for that modality. For example, the original ChatGPT uses natural language processing (NLP) algorithms to extract meaning from text content and produce a textonly output. Multimodal AI, instead, accepts and processes data from multiple sources, including images, video, speech, sound, as well as code and text. Multiple inputs allow for a more detailed, refined assessment of a particular environment or given situation. A multimodal NLP, for example, may identify signs of emotion in a user’s voice and combine that with facial expressions to better interpret a query and tailor a proper response. In this way, multimodal AI more closely resembles human perception.

Multimodal AI will be central to the development of autonomous vehicles (Passenger Economy, Trends 2018) and robotics (Rise of the Machines, Trends 2014) that need to interact with real-world environments. Multimodal AI uses data from cameras, microphones, GPS, radar, LiDAR, and a host of other sensors to better understand and more successfully interact with its surroundings. Likewise, multimodal AI will enable more effective and intuitive human-computer interaction through the use of sensors and wearables (XR Trends 2023) that may even extend to the (Metaverse Trends 2022).

Productivity Boom

We have written previously about Unproductive People (Trends 2023) and other disturbing trends that have weighed on productivity, such as “quiet quitting” in the U.S., “lying flat” in China, Great Resignation (Trends 2022), Playing with FIRE (Trends 2019), and the tragic epidemic of addiction. Productivity growth in the U.S. has stagnated to just 1.2% per year on average over the past decade, despite many technological innovations over the same period. Perhaps advancements like smartphones and social media may have distracted workers and spurred more consumption of content than production of goods and services. However, Multimodal AI (Trends 2024) and GLP-1s (Trends 2024), in contrast, may be advancements that finally usher in a significant, sustained resurgence in productivity. Artificial Intelligence (AI) and GLP-1s will have broad implications for businesses and the economy, but perhaps its most significant may be to accelerate labor productivity. According to data from the National Health and Nutrition Examination Survey (NHANES), over one third of Americans are obese and according to the Association of American Medical Colleges (AAMC), more than 21 million have a substance abuse disorder. While GLP-1s have grabbed headlines for effective weight loss, studies have also observed a reduction in addictive behaviors. The promise of a wonder drug such as GLP-1s could dramatically change the healthcare landscape and society, potentially making a greater portion of the U.S. population healthier and more productive. Additionally, AI will help to automate and scale many tasks humans currently perform. Companies such as Salesforce and Microsoft report seeing as much as a 50% productivity improvement using GenAI tools. As new GenAI tools roll-out to different industries and job functions it will be important to monitor how much of a productivity lift they see. According to J.P. Morgan Market Insights, most analyses posit 1.5-3.0% increase in labor productivity per year globally over the next decade. Importantly, this does not factor AI’s potential to accelerate innovation, which could provide further upside to estimates.

Wonder Drug? GLP-1

Obesity is one of the most significant health challenges around the world. Biopharma company Novo Nordisk estimates more than 750 million people globally are living with obesity, which not only contributes to higher mortality, but also to more than 200 related health complications. Weight management drugs have been studied for decades with very little success until Novo Nordisk launched its GLP-1 (glucagon-like peptide-1) drug, Ozempic, for Type 2 diabetes in 2021. This class of drugs limits the amount of sugar that the liver releases into the bloodstream and slows down how long food stays in the stomach. GLP-1 drugs contribute to weight loss by suppressing appetite and making you feel full sooner when you eat. Ozempic and other approved GLP-1 drugs such as Wegovy (Novo Nordisk) and Mounjaro (Eli Lilly) are seeing patients typically lose 15-22.5% of their body weight.

While losing weight is a great benefit of using these drugs, recent studies show health benefits outside of diabetes and weight management. Most notably was the SELECT trial in August 2023 which demonstrated that patients on Wegovy had a 20% lower incidence of heart attack, stroke, or death from heart disease.

Other benefits that patients observe include a reduction in addictive behaviors from alcohol to smoking to even nail biting. The promise of a wonder drug such as GLP-1 could dramatically change the healthcare landscape and society as a whole, potentially making as much as 70% of the U.S. population healthier and significantly more productive

Long-term studies of GLP-1s are ongoing regarding potential negative side-effects, and there remain major issues regarding the cost and affordability of such drugs. While cost is indeed a factor, GLP-1s could have a transformative impact on our society and economy beyond just losing a few pounds.